Microsoft CHRO: A Conversation About Succession Management

Microsoft doesn't do things the way other companies do them. Microsoft doesn't even do things the way Microsoft used to do them. In fact, the company recently instituted some major changes, including a new development review process, a more rigorous succession planning system, and a serious focus on developing a growth mindset, as CHRO Kathleen Hogan explains in the following conversation with Gallup Managing Director Larry Emond.

Emond:How do you develop talent and prepare your business for the future when your organization spans over 90 countries and more than 110,000 people?

Hogan: This was one of the very first questions I asked myself when I stepped into my role three years ago. I had been leading our Services organization, which is Microsoft's consulting team, so while I had no "direct" HR experience coming into my role, I definitely had a strong focus on the value of our people and the importance of talent. Working with leaders across the company and with our CEO, Satya Nadella, led us to revise our succession planning and talent review system -- a new process we call Talent Talks.

Emond:What was the goal of Talent Talks?

Hogan: At its core, it was about being intentional about our talent and preparing for the future. At the same time, we wanted to eliminate anxiety in the process of having talent discussions, and instead create open discussions with real purpose and business value.

A lot has been written about "today's Microsoft." We're focused on lifelong learning and a growth mindset, and our approach to our people, processes and products is really different than it was in the past. Under Satya's leadership, we've taken a hard look at not just how we do things, but why we do them.

One of our major adjustments in the HR space was how we look at talent for both today's and tomorrow's needs on the individual level, as well as how we look at our talent bench at a higher, organizational level. In the past, we had a process called "People Review" that ended up creating significant nervous energy for a lot of people. While the initial approach was sound, it had deteriorated into a process of number analysis and wasn't yielding results. Our former CEO Steve Ballmer decided it wasn't adding value, and it was shuttered in 2014.

As we looked at our culture, we recognized a key part of embodying a growth mindset is learning from your past to reinvent a better future. With that concept in mind, our leadership team decided to revive the concept of People Review, but with a new process and a new name. We decided to call it Talent Talks, because we wanted to make it less abrasive and judgmental -- and more about placing an emphasis on developing our talent and planning for the future. We needed some way for our leaders to be accountable to building organizational capability, and to ensure that our processes were rigorous and our CEO could get an end-to-end view of the depth of our talent.

Emond:This seems like a huge overhaul for a company the size of Microsoft. How did you get started?

Hogan: The first year, we decided to pilot the discussions, and we took on certain topics like diversity and succession planning. By the second year as we had institutionalized those topics, we were able to include more topics. And by the third year, we have a much more thorough approach to discussing talent.

We think talent should be something that you think about all the time, so our approach is that Talent Talks are just a moment in time to check in with the CEO, versus cramming for a review once a year. When we developed our Talent Talks framework, we decided to start at the leadership level and move down three more clicks -- so in addition to being focused on Satya's direct reports, we would focus on our direct reports, and their directs. The objective is to identify the strength of the bench, how external talent is being cultivated, work through succession planning, review talent inflow and outflow, etc.

So while we do Talent Talks at certain times of the year, talent is something we think about year-round -- it's certainly always on my mind! And because of the process we've put around Talent Talks, I am always able and ready to present our talent story to Satya or our Board of Directors.

Emond:This sounds like a pretty thorough process. How much time does Satya and the leadership team invest in this?

Hogan: For some of our leaders, that means a review covering a 15,000-person organization. In a case like that, we spend more time on the directs and their directs and we look at their teams -- this is a significant investment of time. Each of Satya's directs holds their own process to drive succession planning and building organizational capability. And that feeds into the process that Satya holds (Talent Talks), which involves a meaningful amount of time for each direct report and their organization.

At each Talent Talk, we have Satya, me, the Senior Leader with their HR partner, and also our talent leader, Joe Whittinghill. It's a small group, and we try to keep it small. We talk about the leaders' directs, how they're thinking about their succession planning, their talent, the strength of the bench and any external talent they've brought in and are cultivating. We talk about hiring by level, we look at net talent inflow, we consider competitor influence, and we discuss how a leader might be exposed if someone left, versus where they have lots of up-and-comers and bench strength. We also review all the organization's partners too. We have about 1,200 partners in the company -- so if a leader has partners, we're looking at them, even if they're not a direct report. We take a look at talent that came into the group and talent that went out to see if we can identify patterns to understand why people are moving. It's helpful to understand if the moves are simply career progression or something else so we can course correct in areas that need help. We ask them to discuss how they're activating our culture, including being intentional about creating a diverse and inclusive work environment. Each leader will also talk about their goals and summarize the state of people or culture and process to ensure we're spending time on the future leaders.

The final step is what we call our Combined Talent Talks. Each leader does their individual Talent Talk with Satya, then a couple of weeks later, we have the go-to-market (our sales and marketing leaders) Talent Talk where we'll look holistically across marketing segments and the field (global sales). The second Combined Talent Talk is across our engineering groups where leaders of engineering will look at all the topics that span across their organizations from a talent perspective. These have been powerful additions to the process as it gives Satya and his leaders time to jointly discuss talent topics that are common and key across these groups, and the outcome is to have aligned points of view that drive talent decisions. It's a major investment, but we believe it's well worth it.

Emond:One major aspect of Talent Talks is succession planning. How do you go about that process?

Hogan: Each leader and their directs identify their potential successors. Successful succession planning is more than just identifying who will take over in the case of a role move -- it means having a conversation to see if the identified individual is interested in being the successor. It sounds obvious, but you can't just put somebody on the list without having talked to them first.

I learned this lesson the hard way. As a business leader going through my first year of our former People Review process, I was asked about external candidates I had on my succession plan. It was clear I had put the names on this list, but I'd never talked or met with them. I didn't make that mistake twice, and when the time came for me to move into my role in HR, I had five to six external candidates in addition to the internal candidates that I actively cultivated. The process worked, and we were able to quickly hire and move a new leader into my former role.

I brought this perspective to the Talent Talks process, making sure that leaders create plans that are real and the potential successors are viable and ready for these roles. This forward-looking approach helps us avoid being blindsided and also helps cultivate talent in a way that encourages career growth.

Emond:Do you use the Talent Talks process only for succession planning, or is this also about moving people across the company?

Hogan: When we started our journey to change the culture at Microsoft, we already had aspirations to achieve something we call "One Microsoft." This simply means we're all aligned for the better good of our company, our employees, our customers -- we operate as one unit, even though we're spread all over the world and work on a gamut of products and services.

Talent Talks is definitely instrumental in leaders' career development, and we use the process to look at leaders who needs to gain new and different experiences. Satya has often said that he found it helpful to move around and have different experiences before he became the CEO. I feel the same way -- my career journey is filled with a variety of experiences in different organizations. So within Talent Talks, we look at gaps that someone might have, and we consider ways to move them around to help shore up those needs. We also believe it's incredibly helpful in creating a spirit of "One Microsoft" at the company. When you've worked in different groups during your career at the company, you can bring different and diverse perspectives to new roles -- and maintain great affinity for your former teams.

Emond:Obviously, diversity and inclusion are a big part of talent planning. How are you building that into Talent Talks?

Hogan: While we report on a variety of diversity factors in Talent Talks -- and are very focused on D&I in all areas of our company -- this initiative goes beyond Talent Talks. We firmly believe diversity fuels innovation and inclusion is simply a requirement in building the kind of culture where people want to work.

Talent Talks is moment in time to hold ourselves accountable. It's a way to see if all the things you're doing are having an impact. For us, that includes five key areas around diversity and inclusion:

Expanding the pipeline of potential talent

Driving an inclusive recruiting process

Empowering, mentoring and retaining our people

Delighting our customers through diversity

Transforming our culture

Talent Talks help us look at all of those areas of investment and ensure they're working and that we're driving improvement at all levels.

We're investing in all of these areas to improve diversity and focusing on creating, nurturing, and ensuring our employees are exhibiting inclusive behaviors. You can have a very inclusive culture and not be diverse. And you can have a diverse workforce and not be inclusive. The key is finding balance across the two and then consistently reinforcing it.